Delhi High Court
Tej International (P) Ltd. vs Deputy Commissioner Of Income Tax on 29 September, 2000
Equivalent citations: (2001)69TTJ(DEL)650
ORDER
Phool Singh, J.M. This appeal, filed by the assessee, is directed against order dated 30-3-1993, passed by the learned Commissioner (Appeals)-XIV, New Delhi, for assessment year 1989-90.
2. The solitary ground of appeal is against the levy of interest under sections 234B, 234C and 201(1A) of the Income Tax Act, 1961.
3. Briefly stated, the relevant facts are that assessee, a private limited company, did not have any taxable income in the relevant previous year, except deemed income under section 115J of the Income Tax Act, 1961. The learned assessing officer levied interest under sections 234B and 234C for short payment of advance tax on the aforesaid deemed income. The learned assessing officer also levied interest under section 201(1A) on delayed deposits of tax deducted at source. Aggrieved, the assessee preferred an appeal before the Commissioner (Appeals) who, relying upon the ratio of decision rendered in the case of Sutlej Cotton Mills Ltd. v. Assistant CIT (1993) 199 ITR 170 (AT)(SB) upheld levy of interest under sections 234B and 234C of the Income Tax Act. The learned Commissioner (Appeals) also upheld levy of interest under section 201(1.A) as the assessee did not file any submission against charging of interest under section 201(1A). Still aggrieved, the assessee is in appeal before us.
4. Shri R. Santhanam, the learned counsel for the assessee, submitted that deemed profits under section 115J cannot be considered to be income for the purpose of levy of interest under section 234B and 234C of the Income Tax Act. He placed reliance on the decision of Hon'ble Karnataka High Court in the case of Kwality Biscuits Ltd. v. CIT (2000) 243 ITR 519 (Karn). Even though Hon'ble Gauhati High Court's judgment in Assam Bengal Carriers Ltd. v. CIT (1999) 239 ITR 862 (Gau) is against the assessee, he urged us to follow the decision of Hon'ble Karnataka High Court. Since where a provision in taxing statute can be reasonably interpreted in two ways, that interpretation which is favourable to the assessee has got to be accepted. Regarding levy of interest under section 201(1A), it was submitted that no show-cause notice was served upon the assessee and, therefore, in accordance with the ratio of Hon'ble Andhra Pradesh High Court Dredging Corporation of India Ltd. v. Assistant Commissioner & Anr. (1996) 217 ITR 511 (All), the levy of interest was vitiated in law. The learned counsel, on the strength of these submissions urged us to quash levy of interest under sections 234B, 234C and 201(1A) of the Income Tax Act.
5. Shri Abhay Tayal, learned Senior Departmental Representative made very valiant efforts to defend the stand taken by the lower authorities. He invited our attention to Hon'ble Gauhati High Court's judgment in the case of Assam Bengal Carriers Ltd. v. CIT (supra) wherein levy of interest under sections 234B and 234C, in similar circumstances, was upheld. Reliance was also placed on the Tribunal decision in Sutlej Cotton Mills Ltd. v. Assistant Commissioner (supra). It was further submitted that when two different High Courts have expressed conflicting views, and when jurisdictional High Court is silent on the issue, the Tribunal is free to adopt the view which seems more reasonable to the Tribunal or to follow Tribunal's earlier decisions, if any, on the issue. Both the High Court judgments, in such circumstances. have equal persuasive value. Regarding levy of interest under section 201(1A), Shri Tayal submitted that since fact about delayed deposit of tax deducted at source, and quantification thereof, was mentioned in the tax audit report itself, the assessing officer was duty-bound to levy interest under section 201(1A) on such delayed deposits. No show-cause notice was necessary as the income-tax return itself reflected the interest liability for delayed deposits of tax at source and all that has been done is giving effect to information accompanying the income-tax return. In the background of these submissions, Shri Tayal. strongly supported the levy of interest under sections 234B, 234C and 201(1A) on the assessee.
6. We have considered the rival submissions and perused the records. It is not in dispute that two High Courts, namely, Gauhati High Court and Karnataka High Court, have expressed conflicting views regarding levy of interest under sections 234B and 234C on deemed income under section 115J. Hon'ble Gauhati High Court has opined that when legal fiction is to be created for an obvious purpose, full effect to it should be given. Quoting Lord Asquith who said, "the statute says that you must imagine a certain state of affairs, it does not say that having done so, you must cause or permit your imagination to boggle when it comes to inevitable corollaries of that state of affairs", Hon'ble Gauhati High Court has held that there is no statutory exception excluding the operations of section 115J of the Act. Hon'ble Karnataka High Court, on the other hand, has held that the words 'for the purposes of this section' in Explanation to section 115J(lA) are relevant and cannot be construed to extend beyond the computation of liability to tax. In the opinion of the Hon'ble Karnataka High Court, when a deeming fiction is brought under the statute, it is to be carried to its logical conclusion but without creating further deeming fiction so as to include other provisions of the Act which are not made specifically applicable. It is thus evident that views of these two High Courts are in direct conflict with each other. Clearly, therefore, there is no meeting ground between these two judgments and we are also unable to accept the suggestion that we can follow earlier decisions of this Tribunal, or such views, whichever seem more reasonable to us, of one of these High Courts.
7. It may be mentioned that some Benches of the Tribunal have either taken independent view on the issue in this appeal or have later on followed Hon'ble Gauhati High Court, referred to above. However, with the latest judgment of Hon'ble Karnataka High Court in Kwality Biscuits Ltd.'s case (supra) the situation is materially different. In the hierarchical judicial system that we have, better wisdom of the court below has to yield to higher wisdom of the court above and, therefore, once an authority higher than this Tribunal has expressed an opinion on that issue, we are no longer at liberty to rely upon earlier decisions of this Tribunal even if we were a party to them. Such a High Court being a non-jurisdictional High Court does not alter the position as laid down by Hon'ble Bombay High Court in the matter of CIT v. Godavari Devi Saraf (1978) 113 ITR 589 (Bom). Therefore, we do not consider it permissible to rely upon the earlier decisions of this Tribunal even if one of them is by a Special Bench. It will be wholly inappropriate for us to choose views of one of the High Courts based on our perceptions about reasonableness of the respective viewpoints, as such an exercise will de lacto amount to sitting in judgment over the views of the High Courts something diametrically opposed to the very basic principles of hierarchical judicial system. We have to, with our highest respect of both the Hon'ble High Courts, adopt an objective criterion for deciding as to which of the Hon'ble High Court should be followed by us.
8. We find guidance from the judgment of Hon'ble Supreme Court in the matter of CIT v. Vegetable Products Ltd. (1972) 88 ITR 192 (SC), Hon'ble Supreme Court has laid down a principle that "if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted". This principle has been consistently followed by the various authorities as also by the Hon'ble Supreme Court itself. In another Supreme Court judgment, Petron Engg. Construction (P) Ltd. & Anr. v. CBDT & Ors. (1989) 175 1TR 523 (SC), it has been reiterated that the above principle of law is well established and there is no doubt about that. Hon'ble Supreme Court had, however, some occasions to deviate from this general principle of interpretation of taxing statute which can be construed as exceptions to this general rule. It has been held that the rule of resolving ambiguities in favour of tax payer does not apply to deductions, exemptions and exceptions which are allowable only when plainly authorised. This exception, laid down in Littman v. Barron 1952(2) AIR 393 and followed by Apex Court in Mangalore Chemicals & Fertilizers Ltd. v. Dy. Commr. of CT (1992) Suppl. (1) SCC 21 and Novopan India Ltd. v. CCE & C 1994 (73) ELT 769 (SC), has been summed up in the words of Lord Lohen, "in case of ambiguity, a taxing statute should be construed in favour of a taxpayer does not apply to a provision giving taxpayer relief in certain cases from a section clearly imposing liability". This exception, in the present case, has no application. The rule of resolving ambiguity in favour of the assessee does not also apply where the interpretation in favour of assessee will have to treat the provisions unconstitutional, as held in the matter of State of M. P. v. Dadabhoy's New Chirmiry Ponri Hill Colliery Co. Ltd. AIR 1972 (SC) 614. Therefore, what follows is that in the peculiar circumstances of the case and looking to the nature of the provisions with which we are presently concerned, the view expressed by the Hon'ble Karnataka High Court in the case of Kwality Biscuits Ltd. (supra), which is in favour of assessee, deserves to be followed by us. We, therefore, order the deletion of interest under section 234B and 234C in this case.
9. The remaining grievance of the assessee is against levy of interest under section 201(1A) on the ground of legal niceties and without having anything to say on the merits of leviability of interest under section 201(1A). The tax audit report clearly mentions that there have been lapses in depositing tax deducted at source and it has even quantified the interest liability on account of these delays. The assessee has not refuted the liability to bear consequences of these delays but his only grievance is that show-cause notice was not served to him and that the tax deduction at source returns were filed before another officer. We are of the opinion that since tax deduction at source returns were admittedly filed before another officer, who was in seisin of the matter, assessee's liability under section 201(1A) of the Income Tax Act should have been examined and adjudicated upon by the assessing officer before whom tax deduction at source returns were filed. We, therefore, direct that interest under section 201(1A) as levied by this officer be deleted. It is, however, clarified that the learned assessing officer will have the liberty to take up the matter suitably through his counterpart having tax deduction at source jurisdiction over the assessee and that this order does not affect any liability under section 201(1A), or under such other provisions of law as may be applicable for delayed deposits of taxes deducted at source as may be imposed on the assessee in accordance with the law.
10. In the result, the appeal is allowed.